What Is A Value Driver And Why Should You Care?

Every business has them. Most of the time it’s not very obvious what yours are. It’s something you should spend a lot of time examining. What am I talking about? It’s value drivers. Value drivers are what make your business more or less valuable.

Value drivers – a definition

A value drive is an activity that you do in a wealth management business that helps you be more successful. It’s something that you will focus on if you’re trying to create value in your business. It might be something that helps make you more money or it might be something that will help your clients love you more. In many cases it will be both.

A value driver is a tactical activity that someone in your firm is doing. It’s an activity and not an idea. A value driver requires that you take an action. If it doesn’t require an action, then it’s not a value driver; it’s just an idea.

Are they on my financial statements?

No, value drivers don’t live on your financial statement. Anything that lives on your financial statement has already happened. Your financial statements are important. They tell you what’s happened in your business. There is nothing on your financial statements that’s going to tell you what’s going to happen in the future.

It’s important to know what you’ve done in the past. It’s important to know what actions have produced different results. If these results can be duplicated there’s a good chance this is a value driver. If you don’t know what produced particular results, you need to learn. Then you can make what you’ve learned into an action that continues to drive value for your firm.

Your value drivers measure what’s going to happen in the future.

This is a key concept for you to consider. A value driver is always a future based measurement. A good value driver will tell you that if you are doing enough of a particular activity then things will likely be good. On the other hand, if you’re not doing enough of an added value actions then there’s a good chance that in the future life won’t be very good.

It’s what buyers really want.

At some point you might want to sell your firm. Buyers are happier to buy firms when they can understand what creates value for the owners. If you can communicate this in a way a buyer will understand, they’ll pay you more and give you more cash for your business. Is that something you would find attractive?

It’s what’s going to make your business create extreme value.

More importantly, if you understand what the value drivers are in your firm you’ll be able to position your firm to be more successful. You’ll be doing activities that create more value, make working more fun and if executed well will make you more money.

There’s a virtuous circle that gets established when you understand what drives value in your firm. You make your firm more valuable for others and on the way you make it way more valuable for yourself. Remember, the RIA world is one where you can create extreme value for all of the stakeholders in your firm. You just have to do the right things.

What might some value drivers be for my wealth management business?

Creating value in a wealth management firm means having enough activity. It means managing your reputation by writing for the audience you sell to. It means that you need to be involved in community organizations and groups where your niche hangs out. It means you need to become an expert at the issues that face the group of clients you have the most fun working with.

It also means that you have to have enough sales activities. You have to measure how many engagement processes you do every month. You have to measure how many appointments you have with influencers in your market segment. You have to measure how many people interact with your firm.

Are you seeing a pattern here? Are you seeing that you have to act and the measure what your taking actions about? It’s really this simple. Value drivers are what’s going to make your firm successful. It’s not rocket science. It does require a certain amount of discipline. Are you willing to take that step? You’ll be glad you did.

Why don’t you share with us what actions you take to improve the value of your firm?

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About Josh

Why would you want to listen to me?

My specialty is working with owners of private businesses. It’s where I have the most interest and can add the most value. If you own a business and are interested in a coaching relationship as well as mentoring, I’m your guy.
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ABOUT JOSH PATRICK

My main focus in life is helping private business owners create a sustainable business that will last past them. I help create great outcomes using life experiences I’ve had during my almost forty years of running and being around my favorite people, private business owners. I’m a student, an entrepreneur and a curious observer of life. Read More